North Carolina Education Lottery Audit Shows Poor Performance

Finding shows NCEL lacks strategic plan, which is a common element in every successful business.

April 13, 2008

WAKE COUNTY NC NEWS -- This week the Office of the State Auditor released a performance audit on the North Carolina Education Lottery (NCEL), and the outlook is unfortunately dismal for the North Carolina Taxpayer. The NCEL audit identified significant performance management weaknesses, findings showed that the Lottery has no documented revenue forecasting methodology, no strategic plan, no ongoing market research, and no full-cost accounting of promotional events. Initially, the NCEL performance audit was initiated by a request from the North Carolina Legislative Black Caucus to evaluate the Lottery's management practices in comparison to accepted best practices and lotteries in other states. (Read full report and Responses HERE)

State Auditor Leslie Merritt stated at the audit's release:

"Mapping out the proper strategy is essential to any successful business venture, and if North Carolina is going to be in the business of selling lottery tickets, the taxpayers should know that the Lottery has a roadmap to success."

"In 2005 the Lottery's management was balancing proper business strategy with the urgent mandate to raise a large amount of education money in a little time. Management clearly needs the safety net that the Lottery Oversight Committee was meant to provide."

One highlighted area of performance weakness in the NC Education Lottery is that performance management practices failed to document revenue forecasting methodology. Instead, the lottery revenue forecast is a consensus between the NCEL Executive Director, Legislature, and the Governor's office. Furthermore, the NCEL Executive Director in 2007 attempted to meet the fiscal estimates suggested by the Fiscal Research Division and the Governor's Office.

When the Auditor's team asked the Governor's Office to provide their lottery revenue forecasting methodology, they referred the team to the Fiscal Research Division. The Governor's Office further stated they had no documented forecasting methodology. Finally, when reaching the Fiscal Research Division, the Auditor's team was informed the Fiscal Research Division also had no formal lottery revenue forecasting methodology. The Fiscal Research Division had based its lottery revenue forecast on the lottery experience of other states.

Another highlighted finding that is most distressing is the lack of a strategic plan, which is a common element in every successful business. The NC Education Lottery lacks a mission statement, SWOT, written goals, action plan, measurable objectives, and performance measures.

Sadly, the findings seem to never end with this poorly structured program. The NC Education Lottery operates with no operational or marketing research. Therefore, the NC Education Lottery has no way of determining customer satisfaction, advertising effectiveness, or measuring industry trends.

Once again we find another North Carolina state program failing to maintain proper records of their fiscal and operational actions. Leaving us, the state taxpayer, to wonder if these public officers just wave around their pens as if they are magic wands to generate money. Albeit the NC Education Lottery is designed to be a self-supporting identity to generate funds for education purposes, but who will be responsible if the NC Education Lottery starts operating in the red?

Published by:
Rob Cross
mailto:editor@357news.com

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